You produce goods and price them according to your expenses. However, which of your expenses from the income statement are included? You may ask now if all expenses on the income statement should be included within the price of the produced inventory. Well, the answer is that in fact not all need to be included, but quite a lot of them. 

When analysing your expenses and deciding on which need to be included, think about the subject nature of those expenses – are they directly related to production? Materials used, fuels, energy, other materials used within the production, labour expenses etc. – they need to be included not only as a part of cost of goods sold, but also part of your costing of inventory. As such there are other expenses, which are, just part of goods sold but are not included within the price of inventory, i.e. rental charges, wages of supervisory personnel (managers and so on, who earn monthly salaries) etc. Essentially expenses not included within pricing of inventory are those that don’t change as the production changes, they are fixed expenses that are borne regardless whether your production is only on partial capacity or full capacity.

Essentially you do want to include expenses into your cost of goods sold and into your pricing of inventory since otherwise you would risk of not pricing your inventory fairly to your customers and you risk earning losses at the end of the day.